The state-run Vietnam Asset Management Company (VAMC) signed deals to buy VND1.397 trillion (US$66.27 million) worth bad debts from the Saigon Commercial Bank (SCB) and the Southern Bank on October 11.

The state firm, tasked with cleaning up the highest level of bad debts among six Southeast Asian countries covered by Fitch Ratings, issued an undisclosed sum of special bonds for the loans, of which SCB owns over 85 percent.

VAMC, established July, said SCB was one the first banks that have asked it for a bad debt purchase.

SCB deputy director Vo Tan Hoang Van said the two latest purchases has brought down the non-performing loan ratio in the system to below 3 percent.

Bad debts had accounted for 4.58 percent of the total VND138.98 trillion ($6.58 billion) in loans at the end of July, official news website Banking Times reported last month basing reports released by banks themselves.

Banks with bad debts above 3 percent have to sell off the excessive amount to the state firm, which aims to buy at least VND30 trillion of spoiled debts this year.

VAMC Vice Chairman Nguyen Quoc Hung told news website Saigon Times that the firm had issued VND3.8 trillion worth special bonds to buy debts with a book of value of VND4.978 trillion in total.

"We don't force any [banks] to sell off their bad debts at the moment, we just want to lend support and facilitate banks and enterprises' escape from this tough time," he said.

Hung said that VAMC planned this week to acquire another VND1-1.5 trillion of bad debts from long-time partners and two new customers.

Apart from SCB and Southern Bank, Saigon-Hanoi Bank, Petrolimex Group Bank and state-run Agribank have sold their bad debts to VAMC.

In related news, economists have urged the Vietnamese government to get tough on cross ownerships in credit markets, claiming there were many cases in which creditors are also debtors.

Economist Le Dang Doanh supported the claim as he questioned the fact that some banks let up to 70 percent of their outstanding loans flow into a single project.

Le Xuan Nghia of the National Monetary Policy Consulting Committee said October 9 that economists had asked the government to take measures to get these bank "bosses" out of the banking system.

He told Saigon Times that the prime minister supported the proposal and that the government might target some banks soon.

But he worried that a lack of proper legal basis and stability concerns for a system in which bank executives are set to be criminalized for cross ownership would get in the government's way of implementing the move.